Small business confidence reaches three-year high

Confidence among small businesses rose to its highest level in three years according to the latest Small Business Index from the Federation of Small Businesses (FSB) released in June 2013, with confidence rising across all parts of the UK and in most sectors.

The Small Business Index, which is the FSB’s measure of confidence, reached 15.9 points in the second quarter of 2013, 9.6 points higher than at the start of the year and the second highest reading since the Index began in 2010.

Financial services firms report the highest confidence levels, possibly reflecting the recent peak of the FTSE 100. And despite recent output contractions in the manufacturing sector, small manufacturers are more optimistic about their prospects, suggesting that conditions in the sector are improving.

With house prices rising steadily in 2013, the report also shows that real estate firms confidence levels are improving. This could improve further in the coming months with the ‘Help to Buy’ scheme announced in the Budget.

The 2013 second quarter’s figures show that 4 in 10 businesses that applied to the banking sector for finance were refused. The FSB wants to see moves in place to improve competition in the banking sector with better advice to small firms on alternative finance providers. However, the report shows clearly that Funding for Lending isn’t getting finance to more small and medium sized businesses, although the rates offered are becoming lower.

Other key findings and comments from the FSB 2nd Quarter Report include:

  • More firms expect turnover to increase in the coming three months and more firms expect to grow their business in the coming year.
  • A larger number of firms expect to increase staffing levels in the coming three months, which should be further helped by the Enterprise Allowance announcement made at the Budget and due to come into force next year.
  • More small firms report rising exports, despite slow world trade growth, and expect export growth to pick up further in the coming three months.
  • Retail businesses remain least confident, highlighting again why the FSB’s ‘Keep Trade Local’ campaign is so important.
  • Inflationary pressures from rising energy prices are the main driver of increased business costs, underlining why it is essential to ensure energy suppliers are forced to put an end to rollover contracts and pass on falls in the wholesale price of energy to small business consumers.

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